Iceland: Time to reconsider national approach?

“The foreign debt of the Icelandic economy and the nation is beyond our power and the prospect is black,” said Haraldur L. Haraldsson, an economist, at a political debate hosted by the Organisation for Civic Action yesterday evening, mbl.is reported.

Haskolabio, where the debate took place, was well-attended and the leaders of the opposition and all government ministers were present, with the exceptions of Ossur Skarphedinsson, the Minister of Foreign Affairs, Johanna Sigurdardottir, the Icelandic PM, and Asta Johannesdottir, the Minister of Social Affairs and Social Security, who were attending a meeting of the Social Democrats’ representative committee.

Haraldsson was also sceptical about the liability of the Icelandic public and said the authorities need to ask themselves whether their interference has given rise to financial burdens that would not have existed otherwise.

„The foreign debt of the old banks is beyond the power of Iceland’s economy, it’s staggering in proportion with the GPD,” Haraldsson said. It’s hardly feasible to obtain a surplus in the national budget just to pay off the interest, let alone the instalments of the old banks’ loans. “If this is done, it would lead to great cuts in the public welfare system and even stagnation of the national economy. This money, if it were available, would greatly help the future progress of the Icelandic economy, on the other hand.”

Another dilemma is that the payment of instalments and interests is not carried out in Icelandic krona.
“Therefore I recommend that the government reconsiders its approach to the matter, and those found responsible be held accountable for their actions,” he continued, receiving a thundering applause. At the same time the government should ask for formal discussions with the countries that the banks were operating in and where their debts are.

Furthermore, all the numbers involved have to be on the table. “And I declare that if we enter those discussions well prepared and with a positive attitude, our results will be equally positive. In such discussions it would be put forward that the debts are outside the capacity of our economy. Lastly, it is imperative that this is done through discussions and agreements rather than declarations that will not be paid without any rationale,” said Haraldsson.

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Peter (Germany)

Knowless, as you will have seen I already conceded that probably a compromise will have to be found – though this will be a very tricky business indeed. Not least because there now appears the dangerous possibility that the stable North European countries might be forced to bail out East and South European countries. This might all get very nasty indeed, and I only hope that solid countries like the Netherlands, Denmark, Finland, Germany etc. stay politically stable once their politicians might be forced to explain why billions of Euros will be pumped elsewhere.

Anyway, when I said that there might be less willingness to skip some of Iceland’s debts I was never really talking about unspecific debts of Icelandic banks, but about the obligations that follow from the passport scheme:

‘the willingness of German politicians to scale down Icelandic state debts (i.e. obligations that follow from the passport scheme) might be lesser than in other circumstances.’

only about the fact that having been forced to bail out the BayernLB with 10 billion Euros does not enhance the willingness of politicians in Bavaria to spend even more money in connection with Iceland.”
——————————
I acknowledged that point and agreed.

But I would disagree with referring to my points as technical.
in the light of the Icenews article we all are replying to and in the context of the mention of German loans to “Iceland” (total €25bn?)
and the continued mention of “Iceland” as the recipient of this bulk of money.
By Iceland, I understand the State.
By banks, I understand private institutions.
The old banks are still there and as Alexander pointed out the old debts have not been transferred to the new banks.
The question of liability being placed on the Iceland State on the debts above and beyond the €20k Icesave deposits is far from clear.

The UK gov went in blindly into the Banks and bought up billions of worthless assets.
The Iceland State has not done that with the Banks here.
The toxic debts are still in the old banks which are not in the ownership of the State.

“BTW, by ‘absorbing ‘ ‘bad’ banks like Sachsen LB and in future maybe Bayern LB I am affraid BWLB is making a big mistake (but that is off topic )”

I absolutely agree, and so does the managing board of the LBBW, I suppose. ;) The problem is that the LBBW is owned by the state of Baden-Württemberg, so this is basically a political decision. This is actually at the heart of the problems of the Landesbanken – the involvement of politicians who often do not now anything about the financial markets. For example, all the risky investments of the BayernLB were dealt with in the supervisory board which consists mostly of Baviarian politicians who were quite proud to see ‘their’ BayernLB taking part in a world-wide game… It is not least because of this that the former finance minister of Bavaria had to resign.

However, compared to the Hypo Real Estate these are all ‘small’ problems. It’s amazing to see that a bank no one knew of before now needs money from the taxpayer in unheard-of quantities. The Hypo Real Estate already got 100 (!) billion Euros, and there is a lot more to come.

So it’s clearly true that not only the Icelandic banks made mistakes. However, if solid states like Germany, the Netherlands, France or Sweden start to get in trouble to sell their bonds then there will probably less willingness to find a compromise with Iceland (which nevertheless is unavoidable, I supppose).

@Peter (Germany)
Thx for putting things into perspective. Off course i was generalizing a bit too much.
In the article on the Bayern LB you posted i found one sentence which is quite funny: Bayern LB is ‘considering to join BWLB’ because ‘at the moment it is not well-positioned in the field alone ‘ (sorry german does not translate into english so easily) .
In fact they are meaning: “We are hopelessly going bankrupt. Our only hope is being taken over by BWLB. BWLB, please come and rescue us”
BTW, by ‘absorbing ‘ ‘bad’ banks like Sachsen LB and in future maybe Bayern LB I am affraid BWLB is making a big mistake (but that is off topic )
@Fishy
It is nice to see there are sensible down-to-earth people in Iceland who were not driven crazy by bankers handing out ridiculous loans for crazy consumption. Perhaps in the past people were laughing at you since you were not able to show off so much glitzy luxury stuff but in the end you are the one who is best off.

Niels, actually it was the kfw who transferred about 300 million Euros to Lehman shortly before they went bankrupt. The kfw is not a Landesbank but a state financial institution who is supposed to lend money to small businesses. The blunder was due to an automatic process which is of course no excuse. Still, the kfw is basically a good institution and one of the few larger banks in German that are still prepared to lend bigger amounts of money to businesses.

BTW: I am not a friend of the Landesbanken, and they made many mistakes, but not all of them are as bad as has been described here. For example, the NordLB and also the LBBW are basically sound institutions indeed. The LBBW had to take over the SachsenLB because the SachsenLB went bankrupt and the state of Sachsen would have had problems to bail out the SachsenLB. The ownership of the SachsenLB is one of the major reasons why the LBBW has made huge losses this year. The NordLB has up to now made no losses because they focussed their business on the home markets.

Knowless, I was not talking about technical issues, only about the fact that having been forced to bail out the BayernLB with 10 billion Euros does not enhance the willingness of politicians in Bavaria to spend even more money in connection with Iceland. Whether or not there is a rationale behind this was not my point.

@Terry
Obviously when I said times are hard in Iceland but we are surviving – i was talking about a nation ,not only myself.

I have personally had one of my dreams taken from me because of the “economic crisis”
I did own a plot of land in Kopavogur were my family and myself planed to build our dream home.
Unfortunately after due to current economic climate ..blah,blah,blah……this plan is currently cancelled.
So we have to stay living were we are.
I have only a small mortgage so it is very unlikely that i will be in negative equity ,unless property prices fall by 80% (lets hope not)
I used some of the cheap credit that was available (car loan) but again only for a fraction of the car value.
Not 80-100% car loans in foreign currencies as many did.
When i purchased my prize STi the salesman found it strange that i was taking only a small % in loan and payed the balance in cash!
Yes , I am lucky to still have a job that pays a good salary and takes care of all the bills.
I still have plenty of disposable income.
I Like yourself SAVED for a rainy day , and now we see it is raining heavy!

P.s
Although Icelandic krona worthless and cannot buy much REAL currency such as Euro.usd,Jap Yen etc.
Great British Pound also worthless so holidays to U.K still just affordable.
And also supporting Lewis Hamilton shows Icelandic citizens still support Great Brits!!

The foreign debts of Britain are 456% of GDP and in Switzerland its 433%. a large part of this is in foreign currency, i read somwhere that the bank of England is talking about printing more money for Brown and Darling to burn, UK debt is getting close to 8 trillion,Browns “I shall save the World”
campain is not going as planned, im not shocked over that, 2 clowns playing with fire, perfectly normal outcome and was always to be expected.
Ireland oves 900% of GDP
we know that USA is in deep sh*t
of course most of the world is affected,
i believe that we are only the first to crash and because we are so small we will probably recover alot quicker than the rest of the world,
i also believe that we will learn nothing from this and this will happen again in 60-80 years, people will be just as shocked,
greed will aways control people and they will aways find and create holes in all systems used to opperate and control the finacial markets.
Darwin was wrong about the Homosapien evolving from apes, its the other way around.

@ Alexander E
You said-
The only REAL reason behind Brown actions – to divert attention from situation with own banks and economy in general.
I agree with you on this.
It later came out in the U.K that R.B.O.S was only hours away from going under at the sametime as Brown/Darling was making big noise about Icelandic banking.
Prefect decoy from home troubles?

Things are and will be hard here in Iceland , but we are still surviving.
Remember Glitnir, Kaupthing & Landsbanki accounted for around 95% of banking in Iceland.
We lost all 3 banks in the space of a few days.
How do you think for example the U.K would be now if it had lost 95% of its banks in the sametime?

>Oh! And one more thing – see you in the court! ;) I prefer in Stockholm but you might say it’s not fair to hear Scandinavian problems in Scandinavian court. But then London, Berlin etc. are also not good. What about Vilnius?

The UK used The Anti – terrorism – Crime and Security Act 2001 – so perhaps the Hague may be the appropriate venue ;)

The debate is now becoming repetative. An’Independant’ enquiry AKA ‘whitewash’ is unlikely to assuage all parties.

Whilst I have no desire to make lawyers even fatter. Legal process may dig out the dirt.

“The bailout of Royal Bank of Scotland and Lloyds TSB could add between £1trillion to £1.5trillion to Britain’s public debt, the Office for National Statistics has indicated.

The staggering sum is the equivalent of between 70 and 100 per cent of Britain’s GDP, officials said as they revealed public debt hit a new record high.”

So once again.
Icelandic banks didn’t brake any rules.
Their actions are not something special.
There is no such things as “fair” business – it is all about profit and risk.
Oral agreements are good in Cicily (Italy) – but for the courts written contracts only matter.
As Brumley86 rightly pointed out Iceland (aka government aka people of Iceland) MUST pay only the leftover of guarantees – after all other means to pay are used. But so far no one can tell even very approximately how much could be “extracted” from the banks. So there is no point even to discuss that not mentioning about Stalin style confiscating assets (aka “freezing”).
The only REAL reason behind Brown actions – to divert attention from situation with own banks and economy in general.

Niels wrote:
“The icelandic banks were NATIONALIZED, split up, they do still exist and this means that the icelandic state has some responsibility for it.”
Sorry but they were not NATIONALIZED. Their ownership was changed in legal and business manner – government (aka nation) paid for good part of it. And as any owner – is responsible for that part. Bad parts of the banks are private – and as such Iceland is not obliged to pay all their debts. Even if it could like Brown. But I doubt Brown really can – he just use money people’s money to keep agony of almost dead current “banking” system. That’s why he needs a decoy – Iceland the Terrible ;)

PS. Don’t take this seriously – I’m just joking. I was shocked after collapse of “my” first bank, mad after second and started joking after it happened for the third time. But you can continue to believe in fair banks and politicians if you wish….Oh! And one more thing – see you in the court! ;) I prefer in Stockholm but you might say it’s not fair to hear Scandinavian problems in Scandinavian court. But then London, Berlin etc. are also not good. What about Vilnius?

@Knowless,
In the german press even a number of 1,7 billion euro is mentioned.
One must keep in mind that the german landesbanken (the main investors) basically are very poorly managed state-institutions who have a long history in economic misstakes.
AFAIK one of these banks even transfered several 100 millions of euro to lehmanns the VERY DAY it went bankrupt.
I am absolutely not surprised that they continued to give loans to Iceland (or buy icelandic bonds) even in mid 2008, when other creditors were starting to refuse to do so, as trust in the icelandic economy was dissappearing.
in fact, I would not even be surprised if the icelandic banks especially approached them for loans when they were being turned down everywhere else.
In the past , when the german economy seemed solid as a rock the LB’s were used to the fact that their respective federal governments would bail them out if they had made one of their traditional misstakes but now the economic crisis has caught on in Germany too and this has become more difficult.
You are right, it is a very crucial question how far the responsibility of the icelandic state goes.
Economists like Buiter argue that a failing bank should not be bailed out but split into a ‘good’ and a ‘bad’ bank. The bad bank should go down, together with the ‘toxic debt’ .
Iceland did this, but it also nationalized the banks. I am affraid that this means there is a juridical responsibily for the icelandic state. However I do not know how far this goes.

I am just amused at how things turned out. Weeks and weeks of protests to kick out the “corrupt” and “incompetent” governement; finally Icelanders get what they want, and only a couple weeks later, this. “Well shucks, y’know, it IS a truckload of money; how about we don’t pay it and blame it on the previous management?” Way to go, Iceland!

Speaking of which: convincing a creditor to give up on your debt is only a discussion when you’re offering something in return. As it stands, I believe the appropriate word is “begging”.

Note that I’m not saying the previous government could have done things better, nor that I would know how to fix things, nor that I have an axe to grind with Iceland (on the contrary, in fact). I am, however, tickled by the fact that after all these protests and demonstrations and after bringing down a government, the subtext of official speeches leaves Icelanders exactly where they were six weeks ago.

I can see how this might affect German state attitude to the Icesave deposits.

But for our purposes here, we have to differentiate between what the Iceland state is responsible for and what German Banks loaned to Iceland banks or invested in various schemes.
The Icenews article refers to the huge foreign debt of Iceland banks, it sort of assumes or alludes that it is the responsibility of the Iceland state to repay.

>Untrue. The Icesave accounts were frozen in Iceland *before* the UK government applied its freezing order. Landsbanki had already gone under (Tue 7th Oct).

>The freezing order occurred because the Icelandic government said that they did not believe that they were required to back the EEA deposit guarantee in the event that the Icelandic compensation fund could not compensate depositors for the first E20k (Wed 8th Oct)

As I keep have to remind you it seems, — we know that is not what had been said at all. Both in letters, meetings and phone call months before and just before Darling actions. It is how Darling interpreted or claims he interpred them with Brown approval.

This interpretation comes AFTER the actions of the UK — not BEFORE:

There is big difference between attitude of Icelandic government before which is to support IceSave and UK branch Landsbanki — and after — when Brown Darling invokes Anti-Terrorism act and Northern Rock Act against Kauthpgin Singer Friedlander.

It is stupid to not see the clear difference between intent and good faith before someone knocks you on head and takes assets — and after.

>I suspect, Kaupthing would have fallen anyway because after the fall of Lehman Bros the credit market was frozen – a difficult situation for a bank like Kaupthing.

Kaupthing had monies on the way to account that day. And it had longer term bonds not due in same way as IceSave Landsbanki so its death was in no way at all guaranteed until action of UK FSA taking 30% of so of assets or more and cause technical default for bank.

If UK FSA so confident about facts that Kaupthing catastophicly insolvent, etc. despite EUR 500 million loan from Iceland Central Bank, why Justice Floyd ordered the court file sealed at time appointed the adminstrators on 8th October under instruction of UK FSA?

> I do not think it’s fair (in a political sense) to require Iceland to pay all the way for the mistakes of her banks and her fme – regardless of what the legal situation might be.

I’m not sure about this. The way things stand, they’re only paying for the guarantee, and then only to the extent that they can’t be recovered from the banks. That means a huge increase in short term national debt, but not to unheard of levels.

Meanwhile, assuming that the bond from the new banks to the old banks is accepted the way it is, there’s a huge amount of Icelandic loans that’re being written off (ISK 1 *trillion* in Kaupthing alone). I can’t help but feel that those will be worth something to the Icelandic economy, even if it’s well down the line.

@Peter (Germany)
I fully agree.
Actually if you read the paper by mr. Ingimundur from the icelandic national bank, in which he gives his version of the events leading to the collapse it becomes clear that the icelandic banking system had become very shaky since the beginning of 2008.

At this point the INB frantically started to make attempts to regulate banks, to accumulate extra financial reserves and to dissuade banks from further unsound investments (like the plan of Kaupthing to purchase NIBC bank) .
However it was ‘too little too late’ and several requests to other financial institutions (including the ECB) for loans, swap facilities etc were denied.
There is considerable criticism of Oddsson for his behaviour during this period. Apparently he was not helping the icelandic case very much:

Now that iceland has hit the bottom it faces the very unpleasant situation that the entire world is suffering financially. Indeed, while otherwise large parts of debts could be skipped after some negotiations, this is much less likely now.
However, nobody will win anything if iceland would go completely bankrupt and some sound regulation should be found.
for instance it could be agreed to ‘freeze’ the icelandic debts for some time, wait untill the worldwide situation improves and then see what is possible and what is not. this would give iceland a chance to keep its economy running while creditors would also have a chance to get repayments, even if it means they would have to wait for some years.

I suspect, Kaupthing would have fallen anyway because after the fall of Lehman Bros the credit market was frozen – a difficult situation for a bank like Kaupthing.

However, I can understand that Icelanders are angry about what happened in London. But they should not try (as their former government occasionally did) to proclaim that the failure of the Icelandic bank sector solely happened because of the actions of the British government. No one outside Iceland will buy that!

However now that disaster has struck it may well be that a ‘new deal’ has to be found. I do not think it’s fair (in a political sense) to require Iceland to pay all the way for the mistakes of her banks and her fme – regardless of what the legal situation might be. I suppose after a couple of months a compromise has to be found.

>When Landsbankinn crashed it had been invaded by the British
>Landsbanki was taken over after the British took it over

Untrue. The Icesave accounts were frozen in Iceland *before* the UK government applied its freezing order. Landsbanki had already gone under (Tue 7th Oct).

The freezing order occurred because the Icelandic government said that they did not believe that they were required to back the EEA deposit guarantee in the event that the Icelandic compensation fund could not compensate depositors for the first E20k (Wed 8th Oct)http://en.wikipedia.org/wiki/Icesave

You may be correct in saying that Kaupthing fell because of this. If the nationalization/seizure of Landsbanki had been handled differently and the UK freezing order had not happened, would it still have fallen? I suspect yes, assuming that it could not survive a full run on its UK deposits.

When Landsbankinn crashed it had been invaded by the British, all assets frozen an the bank paralized by use of anti terrorist law,
its possible that there was a good reason for this but taking this action makes the UK government responsible for what happened, as it obviously happend under their control,
I would not pay one cent if it where up to me,
its like your in a war and you take a prisoner,
you are responsible for him, just like Iceland is responsible for the banks after taking them over,
Landsbanki was taken over after the British took it over and destroyed it and KB after it fell because of the previous incident,
im not saying the banks where innocent, but they where no better or worse than many other failing banks in Britain.

@Knowless
On second thought:
You said: “German banks lost big in Lehmanns, did they make claims against the US Gov?”

This is not the same. Lehmanns went bankrupt and that was it. The icelandic banks were NATIONALIZED, split up, they do still exist and this means that the icelandic state has some responsibility for it.

Knowless, I don’t think Bavaria wants Iceland to pay for the risky investments of the BayernLB. The BayernLB made lots of mistakes, not only in Iceland, but also in the US.

The point I was trying to make that – given the background that German state banks already lost quite a large amount of money because of their investment in Icelandic banks – the willingness of German politicians to scale down Icelandic state debts (i.e. obligations that follow from the passport scheme) might be lesser than in other circumstances.

@Knowless
Your guess is as good as mine. I read several german reports on Bayern LB and all they wrote is that Bayern LB had “Engagemente” in iceland with a value of 1,7 Billion. Now what the nature of this is, was not made clear. It can be translated as ‘activities’ for what it is worth.
In fact, some politicians who had been in talks with the Bayern LB , which wants to be bailed out, were dissatisfied themselves with the general vagueness about their financial activities.
Here’s one article (german)http://www.focus.de/finanzen/boerse/finanzkrise/bayernlb-naechstes-ungemach-droht-aus-island_aid_342460.html

Since the solid german bussiness ethics do not apply to the Landesbanken who have an impressive history in missmanagement and blunders I do suspect that the “Engagemente” apply to all fields of the icelandic economy but once more, that is a guess.

Perhaps it is better to speak about “investments in a bankrupt state and investments in a bank” than the prhrase you used.

Fisy said:
“But UK government does have to ask EU commission before giving taxpayer monies to its banks, and doing lots other things because of EU directives it holds in law which now are many more than laws that originate in own parliament”
—————————————————————

Pity Governments like UK Gov don’t listen to the realistic appraisals of the bank’s worth
before being very generous with the taxpayers money.

The Irish taxpayer has just discovered after the nationalisation of Anglo Irish Bank, that overnight they paid €300m for €Om worth of securities. The Bank had already decided not to pursue a golden circle of 10 people for €75m securities held.

Lets see what the Bank did. They loaned €300m to a group of 10 to purchase shares in the Bank in order to boost flagging share price. In return the Bank claimed they have €75m of securities to cover those loans.
Mysteriously decided not even to pursue those securities.
The banks don’t even deserve the steam of the taxpayers urine, instead they are being bailed out of shady corrupt deals like that.

“Press reports on the Bayern LB are not very clear. They write about ‘activities’ valued at 1,7 billion euro. probably it is the whole package: not just state bonds but also loans to banks.
Other german LB’s and ordinary banks did similarly. Apparently Iceland owes them 21 billion euro now.”

yes but what do mean by “Iceland”?
Is there not a big difference between investments in a State and investments in a bankrupt bank?
German banks lost big in Lehmanns, did they make claims against the US Gov?

>“EU memberstate hands” – As a UK citizen one thing this whole affair has brought home to me is how much strength we gain from being part of the EU.

That may be your opinion but it seem that UK have plenty strength without EU.

Looking at trade and incomes EU need UK more than UK need EU. UK is small country in size but not in trade etc.

So dont think Darling Brown call EU commission to ask if oky to seize Landsbanki Kauththing Singer Friedlander monies London — including of course monies of Kaupthing IOM in that.

But UK government does have to ask EU commission before giving taxpayer monies to its banks, and doing lots other things because of EU directives it holds in law which now are many more than laws that originate in own parliament.

Niels is quite right. Especially the Landesbanken performed a very poorly indeed. Not only because of their exposure to Iceland, but also because of connections to Ireland and the housing market in the US. Typically, the BayernLB was very active there, too. For the German taxpayer this is all enormously annoying. HSH Nordbank, WestLB, BayernLB and the LBBW are the Landesbanken that performed particularly badly for which now the states of Hamburg, Schleswig-Holstein, Nordrhein-Westfalen, Baden-Württemberg and Bavaria have to pay scandalous and unimaginable sums of money.

Clearly, no one with some sense in Germany would argue that the dire situation of the German banking sector has solely to do with Iceland (though Icelandic liabilities do play a part, of course).

@Knowless
Press reports on the Bayern LB are not very clear. They write about ‘activities’ valued at 1,7 billion euro. probably it is the whole package: not just state bonds but also loans to banks.
Other german LB’s and ordinary banks did similarly. Apparently Iceland owes them 21 billion euro now.

“Economists are generally academics not business people. Business folks know that the world revolves based on shared trust between people who have done good business together.”
——————————————————
That is true in regards to business trade but Banks / Investment companies are existing in a parallel universe and not even when the State has bought them out and dragged them down to public scrutiny and accountability do they even show a willingness to alter engrained corrupt (maybe even legal) practices.

Peter (Germany) said:
“The state of Bavaria had to save the BayernLB with many billions of euros not least because of its exposure to Iceland. ”
——————————————————
What exactly did the BLB invest in? Iceland state bonds?

>I suppose this is what would normally have happened as everybody knows that the burden of debt is enormous.

But is it? Assume the bank debt that we’re talking about is just the deposit guarantees.

Jon Danielsson says that Iceland’s public debt is likely to be 110-160%. The Icesave part of that (~5bn euros) will be covered, entirely or largely, by the sale of Landsbanki assets, so that will reduce to under 100% within a few years.

USIcelandic, I don’t think Haraldur proposes, as it were, unilateral action, but rather that Iceland seeks a new agreement with Britain, the Netherlands, Germany, Sweden, Finland, Denmark etc. which leads to a massive scale-down of Icelandic foreign debts and possibly also to some new cash injection by its nordic allies. I suppose this is what would normally have happened as everybody knows that the burden of debt is enormous.

The problem is that the whole western world suffers from the economic crisis and that the failure of the Icelandic banks already costs many states a lot of money. Just to give one example: The state of Bavaria had to save the BayernLB with many billions of euros not least because of its exposure to Iceland. Bavaria is a rich state, but surely there is an end to all this, and the willingness of politicians in Bavaria to do without any compensation for that is surely limited. It may well be however that in the end they have to give in.

Economists are generally academics not business people. Business folks know that the world revolves based on shared trust between people who have done good business together. It doesn’t surprise me that an Icelandic economist could get it so wrong. Iceland’s history is a thousand years of splendid isolation, whereas Europe’s history is one of cross-border trade and travel.

It seems to me that H Haraldssonis asking to place Iceland into the Dark isolation like it once was in the good old days of Thora? What other outcome would he expect if Iceland were to simply absolve itself of it’s debts and responsibilities? When Iceland was buying up nice things and fancy cars and traveling the world over, none of these concerns seemed to have been raised. Yet, instead of paying what it owes, Iceland should use it’s monies to build the “Future progress” of the Icelandic economy? What future could it possibly have if Iceland proves to the world that it cannot be trusted to do business with? What market will Iceland trade in? borrow from? sell to? I think this economist is surely confused, I wonder what car he drives.

Haraldur L. who? No disrespect but many economist wheeled out last months does not mean specific ones represent attitude of nation of peoples or government.

You were first, Fisy! :)
Well, I haven’t listen what Haraldur Who said. Only few translated to English quotes. But if this is what he said as economist

„The foreign debt of the old banks is beyond the power of Iceland’s economy, it’s staggering in proportion with the GPD,”

then I’m a ballet dancer…you know…Bolshoy Theater and all that :)

The debt of the banks is not the debt of the government in the first place. And as such – the country. If bank borrowed something – this something should be somewhere. Money is not a steam (if they were – then Iceland would rule the world)…
All these discussions seems to me often very funny. People either don’t know or don’t remember what money actually are. And WHY economy works (or doesn’t).

Look even here

Andy said:
I had my cake and I ate it.

Sorry, Andy, it never works that way. Before eating the cake you must prove you can pay. Or if you cheat with your proof – you might loose your watch (and a couple of teethes). But in any case if YOU eat the cake – I’m not the person to pay your bill.
Same with banks – they borrowed money and they ARE to pay them back. With what they have (including what their shareholders/owners have). If my mortage is all the Landsbanki have for now – then take it. I really don’t give a damn whether I pay to Landsbanki or Deutchebank or Vneshtorgbank. And indeed my loan originally might have came from my bank in my home country :)))

The point is – money are out there if they were there in the first place. And for sure – at the moment nobody knows who owes what and whom. Except Sackur. He knows everything. ;) So we can ask him. Or better wait for result of investigations? At the end it might be that Britain owes Iceland much more… like the whole Scotland! :)))

2Andy.
I know beautiful lava field not far from Reykjavik. Beautiful. You can get it (if you are a creditor). Believe me – you can just seat there and watch for days. No painting that sold at Sothbey (or whatever)for millions can compare with that views (not saying about celebrities underware or old shoes). Niels can prove it. I mean – views.
Or what about a couple of whales? ;)

“EU memberstate hands” – As a UK citizen one thing this whole affair has brought home to me is how much strength we gain from being part of the EU. If Iceland only owed to the UK and we were not in the EU, Iceland would happily default on its debt through some legal sophistry and carry on as usual. After all, everybody hates Britain right? I guess you really f***ed up by also taking the Germans and Dutch in on the scheme as well.

“Organization for Civic Action is a community based voluntary organization that came into being with the intent of hosting civic meetings where those in power were held accountable for their actions, or lack thereof, and a forum was created wherein citizens could voice their concerns directly to their representatives, among others. These meetings have been ongoing since October 27th”

Haraldur L. who? No disrespect but many economist wheeled out last months does not mean specific ones represent attitude of nation of peoples or government.

Pessamism short term understadble and so is huge potential debt burden but still we wait for balance sheet of banks finalized but we do see that assets there are sellable and big pot of gold socalist think missing not so hidden or missing much in seizure in EU memberstate hands.

Julia Set – in nomal circumstances I deal would have been found with Iceland’s large creditors such as the Netherlands, Britain, Germany and the Nordic states. Up to a point I can even understand the comparison with Germany’s debts after the First World War. Unfortunately though the whole Western World is battling with a deep economic crisis and this makes it rather unlikely that rich countries are willing to scale down Iceland’s debts.

Even so it’s not totally ruled out that this is what will eventually happen if Iceland can demonstrate that it will totally bankrupt the country if it is forced to honour its obligations. And that case the EU and the Nordic countries would probably have the moral obligation to bail Iceland out.

If the bill is unpayable, then Iceland should offer up such assets as it has in part payment. The New Banks hold shares and assets (even Hekla must be worth something) that should be made available to the creditors.